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Multifamily Minute Reader Reflections: Handling Renter Insurance
I asked about 45,000 multifamily investors how they handle renters insurance. Here's how it works for them.
Until last year, I'm not sure I ever actually had a renters insurance policy. And yes, I've rented for a solid chunk of my adult life.
I recall a few rental agreements specifying that I should have a policy in place, but it was always glossed over — not just by me, but also by my landlords — so I never really bothered.
I realized the value of renters insurance about a week ago, when I returned home from the holidays to find my house burglarized. Admittedly, because nothing much was taken (and the landlord fixed the lock on his own), it didn't make sense to file a claim. Still, I'm glad I had that safety net in case more had been stolen or broken.
Survey Results
Many landlords also benefit from renters insurance, even if they aren't the ones whose names appear on the policies. We'll get to that in a minute.
First, I asked our Multifamily Minute subscribers last week if they require their residents to have renters insurance to rent an apartment.
The results were pretty close: 45.7% of respondents require all their residents to have rental insurance in place. The remainder said it's up to the renters to decide.
It gets a little more interesting when it comes to checking and verifying that coverage. Here's the breakdown:
Verification method | Percent of respondents |
|---|---|
Proof at lease signing/renewal | 39% |
No verification | 21% |
Resident self reporting | 11% |
Third-party verification | 11% |
Periodic checks | 3% |
Other | 15% |
I'm not surprised at all — except that maybe the percentage of those not verifying the insurance is so low.
Pros of Your Renters Having Insurance
Earlier, I said that landlords stand to benefit from renters having insurance. Let's get into that now. I can think of three main reasons (though I'm sure there're more) why this insurance goes a long way toward improving risk management:
Protection From Liability
If someone is visiting a resident at your building and they slip and fall — maybe even breaking a bone in the process — who's on the hook for the medical and legal costs?
It very well might be you as the property owner. However, if your resident has a renters insurance policy, good news: They will often cover incidents like these. That means their insurance may pay out any medical or legal claims, instead of it coming out of your pocket (or jumping your insurance premiums — which are already skyrocketing).
Property Damage Coverage
Many renters insurance policies cover property damage, as you'd expect to a point. We can use my recent break in as an example: My insurance absolutely would cover replacing or repairing a door, lock, or window that was broken as part of a theft (My landlord didn't bother asking, though, so…).
But this also holds true for, say, a small kitchen fire that damages some cabinets. Or, let's say you fell asleep in the tub and — whoops — suddenly your downstairs neighbor's apartment gets a shower, too.
Tenants' Financial Stability
My personal favorite is that having renters insurance in place helps your renters recover from losses — which, in turn, helps you keep your tenants and the rents flowing in.
Let's say one of your occupied units is badly damaged by a fire. Most policies will cover the costs of your residents moving to a hotel, Airbnb, or some other temporary housing. That means they can still more likely meet their financial obligations to you.
Downsides of Renters Insurance
Naturally there are some downsides, too. Most of the cons boil down to administrative burdens and hassles, whether it's how you verify the policy is in place or disputes around what's covered by your resident's insurance versus yours.
Verifying the policy is in place can be a bit tricky. One of our respondents said that they "have had residents cancel their insurance once the lease signing has completed."
Yikes.
So how can you overcome that? It's not as difficult as you might think: Ask each resident to add you as the property owner to their policy as an additional insured. This often means you'll get notifications when the policy lapses or is cancelled.
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Our Previous Survey Results
It's been a hot minute since we've had a poll, thanks to the holidays. Our last survey covered how prepared we are as multifamily investors for 2024. Give it a read — there's a lot of optimism to be had.